The new starter banks

In an effort to drum up good will from the public in the aftermath of the financial crisis, some major banks have started catering to low-income clients, offering low-fee banking especially for customers with troubled finances.

Photo: Sam Manchester / New York Times

One woman kept her savings — a $100 bill — in the freezer. Another, a single mother in Texas, said she had only enough extra cash each week to buy one wooden letter, for $3, to spell out her daughter's name on her bedroom wall. A third, a housekeeper in Brooklyn, lives in a homeless shelter.

These are not the customers a big bank would normally covet, let alone cater to. But an increasing number of the nation's biggest lenders are doing just that, devising low-fee banking especially for customers with troubled finances. The products, including bare-bones bank accounts and prepaid debit cards, are hardly big moneymakers — in some cases, the banks barely break even.

But for the banks working to overhaul their public images in the aftermath of the financial crisis, the products offer a different and potentially far bigger payout: good will from regulators and a chance to woo more customers who might just become profitable in the long run.

“Banking still ranks among the worst industries in the public's opinion,” said Mike Mayo, a banking analyst at the brokerage firm CLSA. “This is good for the customers and good for the banks' images.”

For example, Bank of America, which faces a multibillion-dollar penalty for its crisis-era mortgage practices and is trying to shake a reputation for dubious home foreclosures, has introduced a banking account intended to prevent troubled customers from running up fees for overdrawing their balances.

As part of those efforts, Bank of America executives shadowed low-income families in four cities and asked them to create collages that showed how they felt about money.

JPMorgan Chase, which has had its share of legal and regulatory woes, has developed a low-cost prepaid card that comes with many features of a traditional bank account. And American Express, known for catering to affluent customers, sponsored a 40-minute documentary, narrated by actor Tyler Perry, that bank executives said was created to expose the costs of living without a bank account.

Still, it is hard not to be skeptical, particularly because the banks, most recently in the subprime housing crisis, traditionally have wrung vast profits from some of these same customers, who paid steep rates for loans and high fees on basic checking accounts. And the new accounts still have their share of fees — JPMorgan's prepaid card, for example, costs $4.95 a month — although they tend to be smaller than in the past.

The latest round of banking products also highlights some banks' longer-term strategies. While the customers might not be profitable right now, they could become much more valuable once they start taking out auto loans, credit cards and other types of higher-margin credit. An influx of borrowers also would help banks as they grapple with tepid economic growth and a financial landscape upended by regulations that erode traditional profit centers such as risky trading.

KeyBank, a lender based in Cleveland, for example, hopes to sell products, including lines of credit and auto loans, to customers who use its basic low-fee bank account.

“Being the right thing to do has a short shelf life,” said Bruce Murphy, the bank's head of corporate responsibility. “Unless you really have an underpinning of the economics, it will not survive.”

For now, the banks are winning rare praise from regulators who are concerned about the ranks of people — roughly 10 million households in the United States — who are pushed onto the financial margins, where they are forced to turn to expensive payday lenders.